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Paul Wick is a tech enthusiast's tech investor. He can rattle off at the drop of a hat the arcana of chip-manufacturing methods, such as "double patterning" and "three-dimensional transistors," and recite the history of corporate giants gone by, such as PeopleSoft, or Newbridge Networks. Wick, 50, has been the manager of the $3.25 billion
Columbia Seligman Communications &amp; Information
fund (ticker: SLMCX) for 23 years. He recently spoke with Barron's about the broad trends that change markets and the value individual companies hold in their intellectual property. For his insights on today's undervalued tech stars—and flashes in the pan—read on.

Barron's:Let's get right into handicapping some tech trends. What are we to make of the Wall Street tech term du jour, Big Data? Is it significant, or just hype?

Wick: I think it's a big deal! There is so much information out there. Seeing trends and correlations in a graphical manner is remarkably helpful in making decisions. Big Data is a trend that has a lot further to go.

"Seeing trends and correlations in a graphical manner is remarkably helpful in making decisions. Big Data has a lot further to go." -- Paul Wick
Martin Klimek for Barron's

Teradatatdc 1.3934426229508197%Teradata Corp.U.S.: NYSEUSD37.11
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17.504716981132077Market Cap
5269620086.66992
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N/ARev. per Employee
233565More quote details and news »tdcinYour ValueYour ChangeShort position
[TDC], which has its own proprietary storage system, has been around a long time. They have a very sticky installed base; they're still doing well. We have historically not liked the valuation on it in the past couple of years, but in the low $50s, it looks intriguing to us.

What other enterprise tech names do you like?

We've looked through a lot of survey data, and enterprise storage demand has remained resilient, which is at odds with the performance of both
NetAppntap -1.3303769401330376%NetApp Inc.U.S.: NasdaqUSD31.15
-0.42-1.3303769401330376%
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17.8Market Cap
9347585578.88679
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2.3113964686998396% Rev. per Employee
476838More quote details and news »ntapinYour ValueYour ChangeShort position
[NTAP] and
EMCEMC 0.4107542942494399%EMC Corp.U.S.: NYSEUSD26.89
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22.040983606557376Market Cap
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1.7106731126812942% Rev. per Employee
351914More quote details and news »EMCinYour ValueYour ChangeShort position
[EMC], in particular. NetApp has refreshed its entire product line over the past year. This is a cash-rich company, with $12 per share in net cash, an enterprise value of $8 billion, and $1 billion in trailing free cash flow. So at $35, this is a cheap stock. It has a pretty substantial maintenance revenue stream, and that maintenance is usually paid upfront. It's not implausible that NetApp could get back to near its 52-week high of $41.

And if you strip out a substantial cash position from EMC, you have the same kind of valuation as NetApp. I mean, it's crazy.

What other tech trends are you bullish on?

We've been pretty bullish about the increased complexity of semiconductors, the overall rise in transistor count, the whole system-on-a-chip phenomenon. Also, the higher bandwidth in mobile phones is leading to much more complex wireless devices with respect to the number of frequency bands that have to be supported.

How do you play all that?

The easiest way to play those trends is [semiconductor-design-software vendor]
SynopsysSNPS -0.11787819253438114%Synopsys Inc.U.S.: NasdaqUSD50.84
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[SNPS], which we view as an inevitable winner as the arms provider to the system-on-a-chip industry. Virtually every large semi company in the world is a customer of theirs, as well as systems companies like
AppleAAPL -0.8743973196044782%Apple Inc.U.S.: NasdaqUSD121.3
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14.006928406466512Market Cap
691740216377.936
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1.7147568013190437% Rev. per Employee
2409500More quote details and news »AAPLinYour ValueYour ChangeShort position
[AAPL]. There are few companies in all of technology that are as predictable and well managed. Going into any given quarter, they have 90% of revenue coming from its backlog. The R&D tax credit helped them crush first-quarter earnings, but their confident tone on bookings implies to me that there's a lot more gas left in the tank. I think the numbers for this year end up at $2.45 a share, and next year at least $2.65. That's meaningfully ahead of consensus. If Synopsys sold for 17 times to 18 times calendar 2014 EPS, it would garner $46, versus a recent $35.

Tell me more about the wireless radio chips for mobile phones and tablets.

Avagoavgo -1.9663141402271838%Avago Technologies Ltd.U.S.: NasdaqUSD125.14
-2.51-1.9663141402271838%
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53.939655172413794Market Cap
32502613416.3025
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1.278568003835704% Rev. per Employee
727143More quote details and news »avgoinYour ValueYour ChangeShort position
[AVGO] is a pure play on LTE. You have upward of 40 different [frequency] bands. Some of this spectrum is hitting up right against WiFi. There's a need to be able to parse out one from the other. What this is doing is requiring the need for a bulk acoustic regulator. Avago is the only one selling them today. TriQuint is on the first or second generation, while Avago is on its seventh generation. We expect the Galaxy S4 will have Avago in it.

Earnings have plateaued at $2.70 per share here, because 40% to 45% of revenue is wireless; the remainder comes from broad-based industrial and networking. Their industrial business was doing $180 million per quarter; now it's down to $125 million per quarter. If we get any kind of bounce back, that part of the business will kick in. It's a $33 stock with a ton of cash. They've consistently raised the dividend, consistently bought back shares.

Avago could get to $43 based on 12 times 2014 earnings of $3.25 a share, plus $4 a share in net cash.

What's your view on the semiconductor capital-equipment makers?

One of the key trends is that migrating chips to leading-edge process nodes is getting even harder with new 3-D transistor architectures. There's an arms race between the major chip manufacturers, Samsung, Intel and
Taiwan Semiconductor
[TSM], who are all vying for the contract to make Apple's chips for the iPhone and iPad.

So how do you play that arms race?

The lack of spending the last few years is a very positive development for the group, and for
Lam ResearchLRCX -2.1636757031946035%Lam Research Corp.U.S.: NasdaqUSD76.87
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1.561077143228828% Rev. per Employee
809125More quote details and news »LRCXinYour ValueYour ChangeShort position
[LRCX]. Lam has among the greatest exposure to memory capital expenditures of all the public semiconductor-equipment companies. As recently as 2011, Lam earned close to $6 per share.

Paul Wick's Picks...

Recent

Company

Ticker

Price*

Qlik Technologies

QLIK

$23.85

NetApp

NTAP

34.81

EMC

EMC

22.63

Synopsys

SNPS

35.10

Broadcom

BRCM

34.53

Qualcomm

QCOM

62.44

Avago

AVGO

32.63

Lam Research

LRCX

45.62

KLA-Tencor

KLAC

55.90

Teradyne

TER

16.06

-- And Pans --

Acuity Brands

AYI

$73.22

Workday

WDAY

60.81

Zillow

Z

57.08

*Prices as of 4/25/13. Source: Bloomberg

The past two years were challenging, as their key memory customers cut back spending, and Lam digested its acquisition of Novellus. The stock is $46, and the company has $7 in net cash per share. With EUV (extreme ultraviolet) lithography facing continuing delays, chip makers are increasingly forced to adopt dual- and quad-patterning techniques for leading-edge chips. Dual-patterning and 3-D transistors are etch- and deposition-intensive.

Lam has finally won Intel as an etch customer after many years of effort. While Intel is at most $100 million in etch revenue for Lam this year, it could grow to $400 million to $500 million a year over time.

KLA-TencorKLAC 1.901651940069151%KLA-Tencor Corp.U.S.: NasdaqUSD53.05
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3112998AFTER HOURSUSD53.05
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23.57777777777778Market Cap
8483809206.45065
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3.770028275212064% Rev. per Employee
464365More quote details and news »KLACinYour ValueYour ChangeShort position
[KLAC] also benefits as you move to double-patterning. The number of process-control steps in a wafer fab just keeps on increasing. KLA has remarkable pricing power and has managed to raise prices consistently for years with every new generation of tools.

Teradyne bought a private handset-test company called LitePoint a few years ago, the leader in connectivity-testing, for Bluetooth and WiFi capabilities in phones. They've had the lowest-cost solution by far, and they've taken 70% share of the merchant market, including all of Apple. It has been a home run for Teradyne. We think this year will be another resounding success for LitePoint, driven by the new 802.11ac standard that's rolling out.

Let's talk about some things you're not as enthusiastic about.

Acuity BrandsAYI 1.662455785750379%Acuity Brands Inc.U.S.: NYSEUSD201.19
3.291.662455785750379%
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0.25846215020627267% Rev. per Employee
373700More quote details and news »AYIinYour ValueYour ChangeShort position
[AYI] is one. They are an industrial lighting supplier. They make light fixtures for commercial and residential applications. The sizzle in the story is that they are selling LED [light-emitting diode] lighting fixtures, and LEDs are growing at an over 100% rate. That business has grown to be about 15% of revenue. That's fine and dandy, except that the core business is not really growing. So you have this company that hypes itself on LEDs, growing maybe 4% per year with a 10% operating margin. And yet it trades at well over 20 times forward earnings. It should be more like 12 or 13 times earnings. The company is supposed to earn roughly $3.45 per share this year, and if you put a 13 multiple on that, you get a $45 stock, but it's at $73.

What do you make of the host of cloud-computing and software-as-a-service companies?

There's an awful lot of euphoria surrounding recently public SaaS firms. It seems likely that companies like
Workdaywday 0.6925373134328359%Workday Inc.U.S.: NYSEUSD84.33
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N/AMarket Cap
16107030349.7314
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N/ARev. per Employee
234421More quote details and news »wdayinYour ValueYour ChangeShort position
[WDAY] will have a very hard time justifying their current share prices. My analyst who follows Workday raves about the caliber of the software, but you're paying $10 billion for a company that's supposed to do about $400 million in sales this year and isn't supposed to be break-even until 2016. There are all these true believers in Workday, with this magical belief it's inevitable they'll be remarkably successful.

How about an Internet name?

One that's just jumping out at us as really off the rails, is Zillow [the online real-estate listings firm]. For one, the valuation is really nutty. At $57,
Zillowz -1.9135876760139607%Zillow Group Inc. Cl AU.S.: NasdaqUSD81.5
-1.59-1.9135876760139607%
/Date(1438376400314-0500)/
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1535598AFTER HOURSUSD81.39
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4784412390.70508
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318455More quote details and news »zinYour ValueYour ChangeShort position
[Z] has a $2 billion market cap, very modest cash flow; I think the trailing Ebitda [earnings before interest, taxes, depreciation, and amortization] is $25 million. You get the sense that most of their brokers don't get anywhere near the conversion rate the company talks about. The conversations I've had with retail brokers—they are not particularly enamored of the service; they are more kind of experimenting with it. There's been a long line of Internet real-estate companies that have been obliterated, like ZipRealty, and Move.com—both of those have come and gone. Five years from now, this is a single-digit stock.